Regulations are Complicating Efforts to Meet National Power Needs

The Federal Energy Regulatory Commission (FERC) has recently turned down a request to increase power output for a data center located adjacent to a Pennsylvania nuclear power plant, signaling the challenges the U.S. faces in scaling up energy production to accommodate the rising demands of artificial intelligence (AI) and large data centers. Specifically, Talen Energy sold its 960-megawatt (MW) data center to Amazon Web Services (AWS), intending for the facility to rely directly on the Susquehanna Steam Electric Station, which produces 2.5 gigawatts of power annually. Under a contractual agreement, AWS planned to ramp up its power requisition from 300 MW to 960 MW in 120 MW increments. However, when PJM Interconnection sought FERC’s permission to temporarily allow the center to increase its power draw to 480 MW, the request was denied as it did not adequately justify why the current limit was insufficient.

Despite the limitations imposed by FERC, the agreement between AWS and Talen remains intact, ensuring that until further regulation, the threshold for power drawn from the Susquehanna facility would stay at 300 MW. Travis Fisher from the Cato Institute expressed that FERC’s decision was prudent, arguing that approving the increase may allow AWS to extract excess power from the grid without due compensation. This could potentially pave the way for more co-located facilities to seek unlimited power access, ultimately leading to costs being transferred to consumers through raised rates. This reinforces the view of some utilities and industry experts who support co-located facilities as more efficient solutions for bringing energy directly to large-load consumers, like data centers.

FERC’s refusal to grant the increase will not likely diminish the interest of large tech companies in utilizing nuclear power for their energy needs. Fisher notes that the growing demand for power from tech giants persists, despite FERC’s constraints on contractual options. Co-location remains viable if such facilities can cover costs associated with the necessary network transmission service. On the other hand, while these co-located facilities can expedite energy generation efforts, an overarching reform targeting the U.S. permitting process is essential, as highlighted by Kent Chandler of the R Street Institute.

A key statistic from the Lawrence Berkeley National Laboratory indicates that the interconnection queue—representing energy projects waiting for grid connection approval—has exploded eight-fold in the past decade, surpassing twice the total installed capacity of the current U.S. power plant inventory. Developers now face an intricate web of both state and federal environmental assessments and stringent regulations, which, coupled with widespread NIMBYism, hinder timely and budget-conscious project completions. A case in point is the SunZia transmission project that had its proposal in 2006 but only initiated construction last year, with final operations expected by 2025.

Looking ahead, political changes—specifically a potential second term for the Trump administration—may instigate significant alterations to regulations such as the Environmental Protection Agency’s greenhouse gas rules for power plants. Advocates argue that rolling back such rules could help enhance grid reliability, efficiency in wholesale markets, and overall cost control for consumers. These alterations would create a more favorable environment for organizations like FERC to facilitate power developments that can meet escalating energy demands.

Nevertheless, without comprehensive reforms that significantly streamline the permitting framework, energy developers in the U.S. will continue to grapple with delays. The overwhelming constraints imposed under current regulations suggest that rapidly expanding power generation in line with increasing demand will remain highly challenging. As the nation seeks to balance the desire for growth in energy-intensive industries with the hurdles of regulatory ecosystems, it reflects not only on the immediate challenges of the tech sector but also raises larger questions about energy sustainability and efficiency moving into the future.